CitiFX European Head of G10 Strategy Richard Cochinos points out that the ECB has ticked every dovish box today:
Going into this meeting, Cochinos recognized a number of dovish red flags which Draghi could wave. In a game of dovish bingo, we would now have a whole set:
– 1. An explicit signal on QE: Confirming market expectations
– 2. An indication that the ECB is not “waiting and seeing”, but already acting on it already (“working and assessing” in Draghi’s words)
– 3. Making clear that the 20bps deposit floor is now a variable – he has said this explicitly
– 4. Discussion of FX and stressing the importance in EUR recovery
President Draghi and the ECB appear to have used all four of these, and EUR has reacted accordingly. Draghi has been as dovish as he could be without actually doing something.
Bottom line: EUR negative. EUR rallies will continue to be sold.